The first round in the bitter battle between telecom heavyweight Bharti Airtel and Reliance Jio, the disruptor, should make Mukesh Ambani a happy man. His 45-minute speech announcing the formal launch of Reliance Jio’s commercial services has dealt a body blow to Airtel, with its shares slumping by as much as 9 per cent on Thursday, resulting in a massive erosion of Rs 12,000 crore in market value for the company.
Within 45 minutes of Mukesh Ambani’s speech at the Reliance AGM, shares of Bharti Airtel nosedived 8.99 per cent to hit a low of Rs 302 on BSE. It recovered marginally to Rs 310.65 at closing time, down 6.48 per cent.
Mukesh Ambani today announced that Reliance Jio will offer data tariffs for its services at as low as Rs 50 per GB, declaring a full-blown war against the incumbent leader Airtel. In what should come as nothing short of a nightmare for Bharti Airtel, Mukesh Ambani said Reliance Jio would offer free voice services to its active users.
"All voice calls for Jio customers will be absolutely free," Ambani said. Roaming charges will also be zero, Ambani said. In addition, Jio will launch 10 plans, offering data at Rs 50 per GB (base rate) against current rate of Rs 250 per GB charged by peers.
Jio’s entry into the market is likely to result in a huge erosion of customers for Airtel, many of whom are now flocking stores for a Jio sim card. The popularity appears to be similar to what has been typical of Apple iPhones.
The biggest factor for a user will be the price war. "We have price points starting from Rs 19 for the occasional data user, to a monthly rate of Rs 149 plan for the light data user and all the way up to a monthly Rs 4,999 plan for the heaviest data user," Ambani said.
Not one to give up easily, Airtel, on the other hand, has launched fresh offers in an attempt to arrest the flow of customers away from its fold. Its latest plan offers 1GB of data per month for Rs 1,498. Customers can then get unlimited updates for just Rs 51.
All a customer will need to do is recharge just once a month and he will end up paying Rs 2110 per year for 13GB of data, against the Rs 3,367 a user would have to shell out using older plans.
Besides the price war, Airtel is also gearing up to take on Jio on another front – data speed.
According to an ET report, Airtel has deployed a technology known as "carrier aggregation" in Mumbai and Kerala to combine different bands of spectrum and create larger blocks of airwaves to offer faster and more stable 4G data services for mobile phone users.
According to Airtel, the enhanced service enables peak download speeds of as much as 135 Mbps, which is faster than what users generally get on a normal 4G network.
This, say industry experts, is a direct attack on Jio which claims broadband speeds at 40-80 faster as compared to incumbent telcos. Jio’s trials have offered peak speeds of 80-90 mbps.
Airtel plans to widen the speed war by deploying the “carrier aggregation” technology in other areas in the coming months. With the help of spectrum acquired from Aircel through a spectrum trading deal, Airtel can potentially offer enhanced speeds in 13 circles in India.
Besides, Airtel has also started offering free and unlimited voice calls with some post-paid data packs. This is over and above offering data at rock bottom prices in some plans, aiming to retain higher-paying users.
While the war between the two behemoths will be one to watch out for, the challenge that Jio’s entry has thrown to the market leaders is immense.The venture, Reliance Jio Infocomm, will be the world's biggest startup with an investment of Rs 1,50,000 crore, the company had said in March. It is believed that the company's subscriber base has already swelled to 25 million during trials.
The RIL Chairman said Reliance Jio plans to cover 90 per cent of India's population by March 2017. The company will introduce 4G handsets at as low as Rs 2,999, Ambani said. At present, Jio's network covers 18,000 cities and two lakh villages.
Shares of Idea Cellular, the third largest telecom subscriber, crashed 10.91 per cent to close at a 52-week low of Rs 83.25. Reliance Communications, the fourth largest operator by subscriber base, plunged 69.18 per cent to close at Rs 49.